Average Pay for holiday calculations
Almost all workers are entitled to 5.6 weeks paid holiday each year. This includes agency workers, workers with irregular hours and workers on zero-hours contracts. Where a worker has fixed hours and is paid a salary, they continue to receive their salary whilst on leave. However, where workers undertake regular overtime, or have variable hours, their holiday pay should be calculated using a reference period.
From April 2020, the reference period is being extended to 52 weeks (in previous years the reference period was 12 weeks). Payroll Manager does not automatically calculate an employee’s holiday pay (as in many cases it does not have enough data to do so accurately) and you should consult HMRC Guide to Holiday Entitlement for more details on how to calculate this. Payroll Manager does however produce a report calculating the total pay of an employee during the 52 week ‘Reference Period’, which allows you to determine the average weekly pay for holiday pay purposes. See our guide to the ‘Pay count report‘ for further details.